<PAGE>
ANNUAL REPORT
as of September 30, 1999
Evergreen
Reserve Money Market Funds
[GRAPHIC]
[LOGO OF EVERGREEN FUNDS]
<PAGE>
Table of Contents
Letter to Shareholders................................... 1
Evergreen Reserve Money Market Fund
(formerly Mentor Money Market Portfolio)
Fund at a Glance....................................... 2
Evergreen Reserve Tax-Exempt
Money Market Fund
(formerly Mentor Tax-Exempt Money Market Portfolio)
Fund at a Glance....................................... 3
Evergreen Reserve U.S. Government
Money Market Fund
(formerly Mentor U.S. Government
Money Market Portfolio)
Fund at a Glance....................................... 4
Financial Highlights
Evergreen Reserve Money Market Fund.................... 5
Evergreen Reserve Tax-Exempt
Money Market Fund...................................... 6
Evergreen Reserve U.S. Government
Money Market Fund...................................... 7
Schedule of Investments
Evergreen Reserve Money Market Fund.................... 8
Evergreen Reserve Tax-Exempt
Money Market Fund...................................... 10
Evergreen Reserve U.S. Government
Money Market Fund...................................... 13
Statements of Assets and Liabilities..................... 14
Statements of Operations................................. 15
Statements of Changes in Net Assets...................... 16
Combined Notes to Financial
Statements............................................... 18
Independent Auditors' Report............................. 22
Additional Information................................... 23
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Evergreen Funds
- --------------------------------------------------------------------------------
Evergreen Funds is one of the nation's fastest growing investment companies with
over $70 billion in assets under management.
With over 80 mutual funds to choose among and acclaimed service and operations
capabilities, investors enjoy a broad range of quality investment products and
services designed to meet their needs.
The Evergreen Funds employ intensive, research-driven investment strategies
executed by over 90 research analysts and portfolio managers. The fund company
remains dedicated to meeting the needs of investors and their advisors in a
global economy. Look to the Evergreen Funds to provide a distinctive level of
service and excellence in investment management.
This annual report must be preceded or accompanied by a prospectus of an
Evergreen fund contained herein. The prospectus contains more complete
information, including fees, charges and other ongoing expenses, and should be
read carefully before investing or sending money.
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Mutual Funds: NOT FDIC INSURED May lose value . Not bank guaranteed
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Evergreen Distributor, Inc.
Evergreen/SM/ is a Service Mark of Evergreen Investment Services, Inc.
<PAGE>
Letter to Shareholders
----------------------
November 1999
Dear Shareholders,
[PHOTO]
William M. Ennis
President and CEO
We are pleased to provide the Evergreen Reserve Money Market Funds annual
report, which covers the twelve-month period ended September 30, 1999.
Uncertainty over Interest Rates Influences the Markets
Although the U.S. economy is in the ninth year of economic expansion, many
believe that valuation levels in some sectors of the stock market are just not
sustainable. During the final quarter of 1998, the S&P 500 index had the highest
return of any quarter since the first quarter of 1987 at 21.30%. The S&P 500
continued to advance in the first half of 1999, dominated by the performance of
a very small group of large-cap stocks. In April and May, value-oriented funds
briefly outperformed growth funds, but lost ground subsequently as growth stocks
regained the leadership position they had had during earlier months. Technology
has been by far the best-performing industry sector.
By the 3rd quarter of 1999, rising interest rates dampened performance of stocks
across the board, and value stocks suffered particularly as investors sought the
refuge of blue chips. Investors' inflation fears and continued doubts about the
ability of U.S. companies to sustain significant growth in earnings prompted an
October sell-off. The Federal Reserve Bank's "tightening bias" leads many to
anticipate further interest rate increases in order to stem even the slightest
inflationary pressure. Additional interest rate hikes would likely have a
negative effect on stock prices, which could restrain consumer spending;
however, many investors are waiting for just such a scenario to take place, so
they can take advantage of lower stock prices as a buying opportunity.
We believe that the economy is still fundamentally strong, and we remain
cautiously optimistic about the prospects for continued growth in the markets.
Evergreen Funds is Ready for the Year 2000/1/
We have been addressing the Year 2000 challenge since February of 1996 and have
committed the time, resources and people necessary to prepare for any
ramifications from the millennium bug. Today, we are confident that our
preparations will enable us to continue to deliver the high-quality Evergreen
products and services on which our shareholders rely. In addition, Evergreen
portfolio managers have placed great emphasis on monitoring portfolios for Y2K
readiness.
We believe that sound investing is about taking steps to meet your
long-term financial needs and goals. We remind you to take advantage of your
financial advisor's expertise to develop and refine a financial plan that will
enable you to meet your objectives. Evergreen Funds offers a broad mix of stock,
bond and money market funds that should make it simple for you to choose the
most appropriate for your portfolio.
We would like to thank you for your continued investment in Evergreen Funds.
Sincerely,
/s/ William M. Ennis
William M. Ennis
President and CEO
Evergreen Investment Company
/1/ The information above constitutes Year 2000 readiness disclosure.
1
<PAGE>
EVERGREEN
Reserve Money Market Fund
(formerly Mentor Money Market Portfolio)
Fund at a Glance as of September 30, 1999
PORTFOLIO COMPOSITION
(based on 9/30/1999 portfolio assets)
[CHART]
U.S. Government Agency Notes -- 38.8%
Corporate Notes/Bonds -- 28.8%
Commercial Paper -- 21.3%
Repurchase Agreement -- 6.2%
Variable Rate Demand Notes -- 2.7%
Bankers Acceptances -- 2.2%
Portfolio
Management
----------
[PHOTO]
Kellie Allen
Tenure: June 1999
[PHOTO]
Bryan K. White
Tenure: June 1999
PERFORMANCE AND RETURNS*
Portfolio Inception Date: 11/19/1997 Class R Class I
Class Inception Date 10/15/1998 11/19/1997
- --------------------------------------------------------------------------------
Average Annual Returns
- --------------------------------------------------------------------------------
1 year n/a 4.95%
- --------------------------------------------------------------------------------
Since Class Inception 4.93% 5.21%
- --------------------------------------------------------------------------------
7-day annualized yield 4.58% 5.21%
- --------------------------------------------------------------------------------
30-day annualized yield 4.57% 5.13%
- --------------------------------------------------------------------------------
Distributions per share for the period** $0.04 $0.05
- --------------------------------------------------------------------------------
*The yield quotation more closely reflects the earnings of the fund than the
total return quotation.
The Fund incurs 12b-1 expenses of 0.38% for Class R. Class I does not pay a
12b-1 fee.
**For Class R, the period from the Class' inception on October 15, 1998 through
September 30, 1999. For Class I, for the 12-month period ending September 30,
1999.
TOTAL RETURN
[GRAPH]
Consumer Price Index - US SBr 1-Mth Treas Bill Reserve Money Market Fund A
10/31/98 10,000 10,000 10,000
11/30/98 10,000 10,029 10,037
12/31/98 9,994 10,066 10,075
1/31/99 10,018 10,103 10,112
2/28/99 10,030 10,136 10,145
3/31/99 10,061 10,170 10,180
4/30/99 10,134 10,210 10,215
5/31/99 10,134 10,248 10,251
6/30/99 10,134 10,285 10,286
7/31/99 10,165 10,321 10,323
8/31/99 10,189 10,359 10,362
9/30/99 10,213 10,398 10,401
Comparison of a $10,000 investment in Evergreen Reserve Money Market Fund, Class
R, versus a similar investment in the Salomon Brothers 1 Month Treasury Bill
Index ("SBr 1-mth Treas. Bill") and the Consumer Price Index ("CPI").
The SBr 1-Mth Treas. Bill is an unmanaged market index which does not include
transaction costs associated with buying and selling securities nor any
management fees. The CPI is a commonly used measure of inflation and does not
represent an investment return. It is not possible to invest directly in an
index.
Total Net Assets: $360,898,194
Average Maturity: 66 days
An investment in the Fund is neither insured nor guaranteed by the Federal
Deposit Insurance Corporation or any other government agency. Although the Fund
seeks to preserve the value of your investment at $1.00 per share, it is
possible to lose money by investing in the Fund. Yields will fluctuate. Past
performance is no guarantee of future results.
2
<PAGE>
EVERGREEN
Reserve Tax-Exempt Money Market Fund
(formerly Mentor Tax-Exempt Money Market Portfolio)
Fund at a Glance as of September 30, 1999
PORTFOLIO COMPOSITION
(based on 9/30/1999 portfolio assets)
[CHART]
Variable Rate Demand Notes -- 98.1%
Revenue & General Obligation Notes/Bonds -- 1.9%
Portfolio
Management
----------
[PHOTO]
Steven C. Shachat
Tenure: June 1999
PERFORMANCE AND RETURNS*
Portfolio Inception Date: 10/15/1998 Class R
Class Inception Date 10/15/1998
- --------------------------------------------------------------------------------
Average Annual Returns
- --------------------------------------------------------------------------------
Since Portfolio Inception 2.53%
- --------------------------------------------------------------------------------
7-day annualized yield 3.00%
- --------------------------------------------------------------------------------
30-day annualized yield 2.72%
- --------------------------------------------------------------------------------
Distributions per share for the period** $0.03
- --------------------------------------------------------------------------------
*The yield quotation more closely reflects the earnings of the fund than the
total return quotation.
The Fund incurs 12b-1 expenses of 0.33% for Class R.
**The period from the Fund's inception on October 15, 1998 through
September 30, 1999.
TOTAL RETURN
[GRAPH]
<TABLE>
<CAPTION>
Consumer Price Index - US SBr 1-Mth Treas Bill Reserve Tax-Exempt Money Market Fund A
<S> <C> <C>
10/31/98 10,000 10,000 10,000
11/30/98 10,000 10,029 10,021
12/31/98 9,994 10,066 10,043
1/31/99 10,018 10,103 10,064
2/28/99 10,030 10,136 10,080
3/31/99 10,061 10,170 10,100
4/30/99 10,134 10,210 10,121
5/31/99 10,134 10,248 10,144
6/30/99 10,134 10,285 10,165
7/31/99 10,165 10,321 10,186
8/31/99 10,189 10,359 10,207
9/30/99 10,213 10,398 10,229
</TABLE>
Comparison of a $10,000 investment in Evergreen Reserve Tax-Exempt Money Market
Fund, Class R, versus a similar investment in the Salomon Brothers 1 Month
Treasury Bill Index ("SBr 1-mth Treas. Bill") and the Consumer Price Index
("CPI").
The SBr 1-Mth Treas. Bill is an unmanaged market index which does not include
transaction costs associated with buying and selling securities nor any
management fees. The CPI is a commonly used measure of inflation and does not
represent an investment return. It is not possible to invest directly in an
index.
Total Net Assets: $66,047,023
Average Maturity: 9 days
An investment in the Fund is neither insured nor guaranteed by the Federal
Deposit Insurance Corporation or any other government agency. Although the Fund
seeks to preserve the value of your investment at $1.00 per share, it is
possible to lose money by investing in the Fund. Yields will fluctuate. Past
performance is no guarantee of future results.
The Fund's income may be subject to certain state and local taxes, and,
depending on your tax status, the federal alternative minimum tax.
3
<PAGE>
EVERGREEN
Reserve U.S. Government Money Market Fund
(formerly Mentor U.S. Government Money Market Portfolio)
Fund at a Glance as of September 30, 1999
PORTFOLIO COMPOSITION
(based on 9/30/1999 portfolio assets)
[CHART]
U.S. Government Agency Notes -- 78.6%
Repurchase Agreements -- 21.4%
Portfolio
Management
----------
[PHOTO]
Kellie Allen
Tenure: June 1999
[PHOTO]
Bryan K. White
Tenure: June 1999
PERFORMANCE AND RETURNS*
Portfolio Inception Date: 6/27/1997 Class R Class I
Class Inception Date 10/15/1998 6/27/1997
- --------------------------------------------------------------------------------
Average Annual Returns
- --------------------------------------------------------------------------------
1 year n/a 4.80%
- --------------------------------------------------------------------------------
Since Class Inception 4.93% 5.15%
- --------------------------------------------------------------------------------
7-day annualized yield 4.53% 5.04%
- --------------------------------------------------------------------------------
30-day annualized yield 4.50% 5.01%
- --------------------------------------------------------------------------------
Distributions per share for the period** $0.04 $0.05
- --------------------------------------------------------------------------------
*The yield quotation more closely reflects the earnings of the fund than the
total return quotation.
The Fund incurs 12b-1 expenses of 0.38% for Class R. Class I does not pay a
12b-1 fee.
**For Class R, the period from the Class' inception on October 15, 1998 through
September 30, 1999. For Class I, for the 12-month period ending September 30,
1999.
TOTAL RETURN
[GRAPH]
<TABLE>
<CAPTION>
Consumer Price Index - US SBr 1-Mth Treas Bill Reserve U.S. Government Money Market Fund A
<S> <C> <C>
10/31/98 10,000 10,000 10,000
11/30/98 10,000 10,029 10,035
12/31/98 9,994 10,066 10,071
1/31/99 10,018 10,103 10,107
2/28/99 10,030 10,136 10,140
3/31/99 10,061 10,170 10,175
4/30/99 10,134 10,210 10,210
5/31/99 10,134 10,248 10,245
6/30/99 10,134 10,285 10,278
7/31/99 10,165 10,321 10,315
8/31/99 10,189 10,359 10,354
9/30/99 10,213 10,398 10,391
</TABLE>
Comparison of a $10,000 investment in Evergreen Reserve U.S. Government Money
Market Fund, Class R, versus a similar investment in the Salomon Brothers 1
Month Treasury Bill Index ("SBr 1-mth Treas. Bill") and the Consumer Price Index
("CPI").
The SBr 1-Mth Treas. Bill is an unmanaged market index which does not include
transaction costs associated with buying and selling securities nor any
management fees. The CPI is a commonly used measure of inflation and does not
represent an investment return. It is not possible to invest directly in an
index.
Total Net Assets: $208,519,802
Average Maturity: 57 days
An investment in the Fund is neither insured nor guaranteed by the
Federal Deposit Insurance Corporation or any other government agency. Although
the Fund seeks to preserve the value of your investment at $1.00 per share, it
is possible to lose money by investing in the Fund. Yields will fluctuate. Past
performance is no guarantee of future results.
4
<PAGE>
EVERGREEN
Reserve Money Market Fund
(formerly Mentor Money Market Portfolio)
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Period Ended
September 30,
1999 (a)
<S> <C>
CLASS R
Net asset value, beginning of period $ 1.00
--------
Income from investment operations
Net investment income 0.04
Less distributions to shareholders from net investment income (0.04)
--------
Net asset value, end of period $ 1.00
--------
Total return 4.93%
Ratios and supplemental data
Net assets, end of period (thousands) $323,392
Ratios to average net assets
Expenses 0.83%+
Net investment income 4.32%+
</TABLE>
<TABLE>
<CAPTION>
Year Ended September 30,
----------------------------
1999 1998 (b)
<S> <C> <C>
CLASS I
Net asset value, beginning of period $ 1.00 $ 1.00
------------ ------------
Income from investment operations
Net investment income 0.05 0.05
Less distributions to shareholders from net
investment income (0.05) (0.05)
------------ ------------
Net asset value, end of period $ 1.00 $ 1.00
------------ ------------
Total return 4.95% 4.74%
Ratios and supplemental data
Net assets, end of period (thousands) $ 37,506 $ 40,970
Ratios to average net assets
Expenses 0.32% 0.33%+
Net investment income 4.82% 5.35%+
</TABLE>
(a) For the period from October 15, 1998 (commencement of class operations) to
September 30, 1999.
(b) For the period from November 19, 1997 (commencement of class operations) to
September 30, 1998.
+ Annualized.
See Combined Notes to Financial Statements.
5
<PAGE>
EVERGREEN
Reserve Tax-Exempt Money Market Fund
(formerly Mentor Tax-Exempt Money Market Portfolio)
Financial Highlights
(For a share outstanding throughout the period)
<TABLE>
<CAPTION>
Period Ended
September 30,
1999 (a)
<S> <C>
CLASS R
Net asset value, beginning of period $ 1.00
-------
Income from investment operations
Net investment income 0.03
Less distributions to shareholders from net investment income (0.03)
-------
Net asset value, end of period $ 1.00
-------
Total return 2.53%
Ratios and supplemental data
Net assets, end of period (thousands) $66,047
Ratios to average net assets
Expenses 0.74%+
Net investment income 2.51%+
</TABLE>
(a) For the period from October 15, 1998 (commencement of class operations) to
September 30, 1999.
+ Annualized.
See Combined Notes to Financial Statements.
6
<PAGE>
EVERGREEN
Reserve U.S. Government Money Market Fund
(formerly Mentor U.S. Government Money Market Portfolio)
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Period Ended
September 30,
1999 (a)
<S> <C>
CLASS R
Net asset value, beginning of period $ 1.00
-------
Income from investment operations
Net investment income 0.04
Less distributions to shareholders from net investment income (0.04)
-------
Net asset value, end of period $ 1.00
-------
Total return 4.93%
Ratios and supplemental data
Net assets, end of period (thousands) $99,417
Ratios to average net assets
Expenses 0.80%+
Net investment income 4.23%+
</TABLE>
<TABLE>
<CAPTION>
Year Ended September 30,
---------------------------
1999 1998 1997 (b)
<S> <C> <C> <C>
CLASS I
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00
-------- -------- -------
Income from investment operations
Net investment income 0.05 0.05 0.01
Less distributions to shareholders from net
investment income (0.05) (0.05) (0.01)
-------- -------- -------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00
-------- -------- -------
Total return 4.80% 5.42% 1.39%
Ratios and supplemental data
Net assets, end of period (thousands) $109,102 $106,273 $61,805
Ratios to average net assets
Expenses 0.33% 0.33% 0.33%+
Net investment income 4.69% 5.27% 5.26%+
</TABLE>
(a) For the period from October 15, 1998 (commencement of class operations) to
September 30, 1999.
(b) For the period from June 27, 1997 (commencement of class operations) to
September 30, 1997.
+ Annualized.
See Combined Notes to Financial Statements.
7
<PAGE>
EVERGREEN
Reserve Money Market Fund
(formerly Mentor Money Market Portfolio)
Schedule of Investments
September 30, 1999
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
BANKERS' ACCEPTANCES - 2.2%
Commerzbank AG NY Branch,
$ 3,000,000 5.08%, 2/11/2000.................................. $ 2,999,092
5,000,000 5.17%, 4/19/2000.................................. 4,999,205
------------
Total Bankers' Acceptances
(cost $7,998,297)................................ 7,998,297
------------
COMMERCIAL PAPER - 21.3%*
13,000,000 Alpine Securitization Corp.,
5.41%, 10/22/1999................................ 12,959,202
13,000,000 Atlantic Asset Securitization Corp., 5.41%,
10/20/1999....................................... 12,962,881
15,732,000 Broadway Capital Corp.,
5.40%, 10/28/1999................................ 15,668,286
13,000,000 Concord Minutemen Capital Corp., 5.43%,
10/8/1999........................................ 12,986,274
10,000,000 Moat Funding LLC,
5.43%, 2/11/2000................................. 10,000,000
12,353,000 Special Purpose Accounts Receivables,
5.42%, 11/8/1999................................. 12,282,327
------------
Total Commercial Paper
(cost $76,858,970)............................... 76,858,970
------------
CORPORATE BONDS & NOTES - 31.1%
Banks - 4.9%
1,173,000 Bank America Corp.,
9.75%, 7/1/2000.................................. 1,206,807
2,000,000 Harris Trust & Savings Bank Chicago, IL,
5.00%, 1/27/2000................................. 2,000,000
3,540,000 Midlantic Banks,
9.88%, 12/1/1999................................. 3,563,184
3,000,000 NationsBank NA,
5.42%, VRDN...................................... 2,999,595
8,000,000 Norwest Corp.,
Ser. F
6.75%, 5/12/2000................................. 8,040,609
------------
17,810,195
------------
Brokers - 9.4%
3,000,000 Goldman Sachs Group LP,
Ser. A
5.41%, 2/25/2000 (a)............................. 3,000,000
Lehman Brothers Holdings, Inc., Ser. E
4,000,000 6.50%, 7/18/2000.................................. 4,008,133
2,250,000 7.08%, 5/22/2000.................................. 2,263,329
1,400,000 8.15%, 5/15/2000.................................. 1,416,975
1,000,000 Morgan Stanley Dean Witter MTN,
Ser. C
5.89%, 3/20/2000................................. 1,000,270
10,000,000 Paine Webber Group, Inc.,
7.00%, 3/1/2000.................................. 10,049,077
12,000,000 Salomon Smith Barney Hldgs., Inc.,
7.98%, 3/1/2000.................................. 12,100,520
------------
33,838,304
------------
Finance & Insurance - 15.7%
13,000,000 Dorada Fin. Corp.,
5.74%, 9/15/2000................................. 13,000,000
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CORPORATE BONDS & NOTES - continued
Finance & Insurance - continued
$ 2,500,000 Ford Holdings, Inc.,
9.25%, 3/1/2000.................................. $ 2,534,325
2,000,000 Ford Motor Credit Co.,
6.95%, 5/15/2000................................. 2,012,915
10,000,000 General Electric Capital Corp., 5.19%, 4/17/2000.. 9,992,228
1,400,000 Hilander Fin. LLC,
(LOC: American Bank & Trust),
5.40%, VRDN...................................... 1,400,000
Household Fin. Corp. MTN:
3,285,000 7.15%, 6/15/2000.................................. 3,309,278
6,000,000 9.55%, 4/1/2000................................... 6,109,721
6,000,000 Household Finl. Corp. Ltd.,
7.45%, 4/1/2000.................................. 6,040,687
3,100,000 Transamerica Fin. Corp. MTN,
6.75%, 6/1/2000.................................. 3,117,840
5,000,000 U.S. Leasing Int'l.,
6.36%, 3/20/2000................................. 5,015,192
4,000,000 USL Capital Corp.,
8.13%, 2/15/2000................................. 4,035,406
------------
56,567,592
------------
Other - 1.1%
3,000,000 1800 Harrison Foundation,
Ser. 1999-A (a)
4.95%, VRDN...................................... 3,000,000
1,200,000 CCM Properties, LLC,
(Ser. 96-A) (AMBAC)
5.43%, VRDN ..................................... 1,200,396
------------
4,200,396
------------
Total Corporate Bonds & Notes
(cost $112,416,487).............................. 112,416,487
------------
U.S. GOVERNMENT AGENCY BONDS & NOTES - 38.7%
25,000,000 Federal Farm Credit Bank,
5.06%, 10/1/1999................................. 25,000,000
Federal Home Loan Bank:
4,000,000 4.98%, 3/29/2000.................................. 3,997,148
1,000,000 5.10%, 3/3/2000................................... 999,676
5,000,000 Federal Home Loan Mortgage Corp.,
5.09%, 3/20/2000................................. 4,998,136
Federal Home Loan Mortgage Corp. Disc. Note:
30,000,000 5.15%, 10/21/1999................................. 29,914,167
12,500,000 5.22%, 10/7/1999.................................. 12,489,125
12,587,000 5.22%, 10/14/1999................................. 12,563,273
50,000,000 5.26%, 11/4/1999.................................. 49,751,611
------------
Total U.S. Government Agency Bonds & Notes
(cost $139,713,136).............................. 139,713,136
------------
MUNICIPALS - 0.3%
1,000,000 Catholic Hlth. Initiatives RB, Taxable, Ser. C
(LOC: Morgan Guaranty Trust)
5.50%, VRDN
(cost $1,000,000)................................ 1,000,000
------------
</TABLE>
8
<PAGE>
EVERGREEN
Reserve Money Market Fund
(formerly Mentor Money Market Portfolio)
Schedule of Investments(continued)
September 30, 1999
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
REPURCHASE AGREEMENTS - 6.2%
$22,250,865 Goldman Sachs & Co.,
(5.40%, dated 9/30/1999,
due 10/1/1999 maturity value $22,254,203),
(cost $22,250,865) (b)......................... $ 22,250,865
--------------
</TABLE>
<TABLE>
<C> <S> <C> <C>
Total Investments -
(cost $360,237,755)........................ 99.8% 360,237,755
Other Assets and Liabilities - net.......... 0.2 660,439
----- ------------
Net Assets -................................ 100.0% $360,898,194
===== ============
</TABLE>
* Rates listed represent yield to maturity.
(a) Securities may be sold to "qualified institutional buyers" under Rule 144A
or securities offered pursuant to Section 4(2) of the Securities Act of
1933, as amended. These securities have been determined to be liquid under
guidelines established by the Board of Trustees.
(b) Collateralized by $14,084,188 FHLMC, 6.00% to 7.00%, 09/01/06 to 05/01/19;
value including accrued interest--$12,357,069. $10,612,921 FNMA, 6.00% to
9.00%, 07/01/09 to 07/01/22; value including accrued interest--$10,338,814.
Summary of Abbreviations:
AMBAC American Municipal Bond Assurance Corp.
FHLMC Federal Home Loan Mortgage Corp.
FNMA Federal National Mortgage Association
LOC Letter of Credit
MTN Medium Term Note
RB Revenue Bond
VRDN Variable Rate Demand Note
Variable Rate Demand Notes are payable on demand on no more than seven
calendar days notice given by the Fund to the issuer or other parties not
affiliated with the issuer. Interest rates are determined and reset by
the issuer daily, weekly, or monthly depending upon the terms of the se-
curity. Interest rates presented for these securities are those in effect
at September 30, 1999.
See Combined Notes to Financial Statements.
9
<PAGE>
EVERGREEN
Reserve Tax-Exempt Money Market Fund
(formerly Mentor Tax-Exempt Money Market Portfolio)
Schedule of Investments
September 30, 1999
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MUNICIPAL OBLIGATIONS - 99.9%
Alaska - 1.7%
$ 1,100,000 Alaska IDA RB, Sheldon Jackson College Proj., (LOC:
Bank of America N.A.),
3.85%, VRDN....................................... $ 1,100,000
-----------
Arizona - 3.0%
2,000,000 Maricopa Cnty., AZ PCRB,
(LOC: Bank of America N.A.),
3.90%, VRDN....................................... 2,000,000
-----------
Delaware - 1.2%
Delaware EDA RB, Delmarva Pwr. & Light Co. Proj.:
600,000 3.95%, VRDN (Gtd. by Delmarva Pwr. & Light Co.), .. 600,000
200,000 Ser. 1993C,
3.95%, VRDN........................................ 200,000
-----------
800,000
-----------
District of Columbia - 8.3%
District of Columbia GO:
400,000 (LOC: Canadian Imperial)
4.00%, VRDN........................................ 400,000
3,500,000 Ser. 1992A-2, (LOC: Canadian Imperial),
4.00%, VRDN........................................ 3,500,000
1,600,000 Ser. 1992A-4, (LOC: Societe Generale Bank),
4.00%, VRDN........................................ 1,600,000
-----------
5,500,000
-----------
Florida - 14.1%
900,000 Alachua Cnty., FL Hlth. Facs. Auth. RB, (LOC:
Suntrust Bank & Ins. by MBIA),
3.77%, VRDN....................................... 900,000
3,000,000 Dade Cnty., FL IDA RB,
(Gtd. by Florida Pwr. & Light
Co.),
3.85%, VRDN....................................... 3,000,000
2,100,000 Dade Cnty., FL, Wtr. & Swr. Sys.
RB, (LOC: Commerzbank & Ins. by FGIC),
3.65%, VRDN....................................... 2,100,000
2,000,000 Polk Cnty., FL IDA RB,
(LOC: Rabobank Nederland),
3.85%, VRDN....................................... 2,000,000
1,300,000 Tampa, FL Occupational License
RB, Ser. A, (Ins. by FGIC), 3.75%, VRDN........... 1,300,000
-----------
9,300,000
-----------
Illinois - 3.0%
2,000,000 Illinois Toll Highway Auth., Toll RB, Ser. B, (LOC:
Landesbank Hessen & Ins. by FSA),
3.85%, VRDN....................................... 2,000,000
-----------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MUNICIPAL OBLIGATIONS - continued
Indiana - 7.3%
$ 1,300,000 Indiana Dev. Fin. Auth. RB,
Edgewater Sys., Inc. Proj.,
(LOC: Bank One N.A.),
3.90%, VRDN....................................... $ 1,300,000
1,400,000 Indiana Hlth. Fac. Fin. Auth. RB,
(LOC: Comerica Bank),
3.75%, VRDN........................................ 1,400,000
2,100,000 Indianapolis, IN, MHRB,
(LOC: National City Bank),
3.85%, VRDN....................................... 2,100,000
-----------
4,800,000
-----------
Iowa - 2.9%
1,900,000 Iowa Fin. Auth. RB, Burlington Med. Ctr. Proj.,
(LOC: Firstar Bank & Ins. by FSA),
3.80%, VRDN....................................... 1,900,000
-----------
Kentucky - 5.7%
1,400,000 Lexington Fayette Urban Cnty.,
KY RB Arpt. Corp, Ser. A,
(Ins. by MBIA),
4.10%, VRDN....................................... 1,400,000
2,400,000 Ohio Cnty., KY PCRB, Big Rivers Elec. Corp., Ser.
1985, (LOC: CS & Ins. by AMBAC),
3.80%, VRDN....................................... 2,400,000
-----------
3,800,000
-----------
Louisiana - 5.4%
300,000 Lake Charles, LA Harbor &
Terminal District, PCRB, Conoco
Inc. Proj., (Gtd. by E.I. Du Pont), 3.95%, VRDN... 300,000
600,000 Louisiana Pub. Facs. Auth., Hosp.
RB, Willis Knighton Med. Ctr.,
(LOC: Mellon Bank N.A. & Ins.
by AMBAC),
4.00%, VRDN....................................... 600,000
800,000 Saint Charles Parish, LA PCRB,
(Gtd. by Oil Co.),
3.95%, VRDN....................................... 800,000
1,900,000 South Louisiana Port Commission, Port RB, Holnam,
Inc. Proj.,
(LOC: Wachovia Bank N.A.),
3.85%, VRDN....................................... 1,900,000
-----------
3,600,000
-----------
Maryland - 5.8%
1,200,000 Maryland Community Dev. Administration RB, Avalon
Ridge Apts. Proj., (COLL: GNMA),
3.75%, VRDN....................................... 1,200,000
1,000,000 Maryland Hlth. & Higher Edl. Facs. RB, Catholic
Hlth., Ser. B,
(LOC: Toronto Dominion Bank),
3.80%, VRDN....................................... 1,000,000
</TABLE>
10
<PAGE>
EVERGREEN
Reserve Tax-Exempt Money Market Fund
(formerly Mentor Tax-Exempt Money Market Portfolio)
Schedule of Investments(continued)
September 30, 1999
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MUNICIPAL OBLIGATIONS - continued
Maryland - continued
$ 1,650,000 Montgomery Cnty., MD EDA RB, (LOC: Bank of America
N.A.), 3.80%, VRDN................................ $ 1,650,000
-----------
3,850,000
-----------
Michigan - 3.8%
1,400,000 Detroit, MI Swr. Disp. RB,
Ser. B, (Ins. by MBIA),
3.80%, VRDN....................................... 1,400,000
1,100,000 Wayne Charter Cnty., MI RB,
Detroit Metropolitan Wayne
Cnty. Arpt., (LOC: Bayerische Landesbank),
3.75%, VRDN....................................... 1,100,000
-----------
2,500,000
-----------
Minnesota - 3.5%
2,300,000 Minnesota Hsg. Fin. Agcy. RB,
(LIQ: Merrill Lynch),
3.85%, VRDN....................................... 2,300,000
-----------
Mississipi - 4.2%
2,800,000 Jackson Cnty., MS Port Fac. RB,
(Gtd. by Chevron USA),
3.90%, VRDN....................................... 2,800,000
-----------
New Mexico - 1.4%
900,000 Albuquerque, NM Arpt. RB,
Sub. Lien, (Ins. by AMBAC),
3.65%, VRDN....................................... 900,000
-----------
New York - 3.0%
1,250,000 Madrid Waddington, NY Central
Sch. Dist. GO, (Ins. by FGIC), 4.50%, 6/15/2000... 1,257,274
700,000 New York Thruway Auth.
General RB, (LOC: Societe
Generale Bank),
4.10%, VRDN....................................... 700,000
-----------
1,957,274
-----------
North Carolina - 2.3%
600,000 Charlotte, NC Arpt. RB, Ser. A,
(LOC: Commerzbank & Ins. by MBIA),
3.65%, VRDN....................................... 600,000
900,000 North Carolina Edl. Facs. Fin. Auth. Agcy. RB,
Bowman Grey Sch.
Med. Proj., (LOC: Wachovia Bank N.A.),
3.77%, VRDN....................................... 900,000
-----------
1,500,000
-----------
Ohio - 5.0%
3,300,000 Hamilton Cnty., OH Hlth Sys. RB, (LOC: Sumitomo
Bank),
4.05%, VRDN....................................... 3,300,000
-----------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MUNICIPAL OBLIGATIONS - continued
South Carolina - 1.1%
$ 700,000 Piedmont Muni. Pwr. Agcy., Elec.
RB, Ser. B, (LOC: CS & Ins.
by MBIA),
3.85%, VRDN....................................... $ 700,000
-----------
Tennessee - 1.5%
600,000 Clarksville, TN Pub. Bldg. Auth. RB, Pooled
Financing,
(LOC: Bank of America N.A.),
3.80%, VRDN....................................... 600,000
400,000 Tennessee, BAN, Ser. C,
3.65%, VRDN....................................... 400,000
-----------
1,000,000
-----------
Texas - 9.6%
3,250,000 Brazos River, TX Harbor Navigation Dist. RB, Dow
Chemical Co. Proj. (Gtd. by Dow Chemical Co.),
4.05%, VRDN....................................... 3,250,000
1,500,000 Gulf Coast Wst. Disp. Auth. RB, Amoco Oil Co.,
(Gtd. by Amoco Oil),
4.00%, VRDN....................................... 1,500,000
1,600,000 Harris Cnty., TX Hsg. Fin. Corp., MHRB, Methodist
Hosp.,
Ser. 1994, (LOC: Morgan Guaranty, NY),
3.95%, VRDN....................................... 1,600,000
-----------
6,350,000
-----------
Utah - 3.8%
Emery Cnty., UT PCRB, Pacificorp Proj.:
600,000 3.70%, VRDN........................................ 600,000
1,900,000 3.95%, VRDN........................................ 1,900,000
-----------
2,500,000
-----------
Virginia - 0.9%
600,000 Lynchburg, VA IDA, Ser. D,
(LOC: Mellon Bank & Ins. by AMBAC),
3.85%, VRDN....................................... 600,000
-----------
Other - 1.4%
PFOTER, (LOC: CS):
500,000 PPT-4, 4.30%, VRDN................................. 500,000
400,000 PPT-8, 4.40%, VRDN................................. 400,000
-----------
900,000
-----------
</TABLE>
<TABLE>
<C> <S> <C> <C>
Total Investments -
(cost $65,957,274).......................... 99.9% 65,957,274
Other Assets and Liabilities - net........... 0.1 89,749
----- -----------
Net Assets - ................................ 100.0% $66,047,023
===== ===========
</TABLE>
11
<PAGE>
EVERGREEN
Reserve Tax-Exempt Money Market Fund
(formerly Mentor Tax-Exempt Money Market Portfolio)
Schedule of Investments(continued)
September 30, 1999
Summary of Abbreviations:
AMBAC American Municipal Bond Assurance Corp.
BAN Bond Anticipation Note
COLL Collateral
EDA Economic Development Authority
FGIC Financial Guaranty Insurance Co.
FSA Financial Security Assurance, Inc.
GNMA Government National Mortgage Association
GO General Obligation
IDA Industrial Development Authority
LIQ Liquidity Provider
LOC Letter of Credit
MBIA Municipal Bond Investors Assurance Corp.
MHRB Multifamily Housing Revenue Bond
PCRB Pollution Control Revenue Bond
PFOTER Puttable Floating Option Tax Exempt Receipts
PPT Pooled Puttable Trust
RB Revenue Bond
VRDN Variable Rate Demand Note
See Combined Notes to Financial Statements.
12
<PAGE>
EVERGREEN
Reserve U.S. Government Money Market Fund
(formerly Mentor U.S. Government Money Market Portfolio)
Schedule of Investments
September 30, 1999
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
FEDERAL HOME LOAN BANK - 9.1%
$ 5,000,000 4.90%, 2/4/2000................................... $ 4,999,682
2,000,000 4.95%, 2/24/2000.................................. 1,999,037
2,000,000 4.98%, 3/29/2000.................................. 1,998,574
3,000,000 5.10%, 3/3/2000................................... 2,999,028
3,000,000 5.26%, 10/1/1999.................................. 2,999,955
4,000,000 5.26%, 10/1/1999.................................. 3,999,647
------------
Total Federal Home Loan Bank
(cost $18,995,923)............................... 18,995,923
------------
FEDERAL HOME LOAN MORTGAGE CORP. - 2.4%
5,000,000 5.18%, 10/20/1999 (cost $4,998,136)............... 4,998,136
------------
FEDERAL HOME LOAN MORTGAGE CORP. DISC. NOTE - 23.9%
25,000,000 5.22%, 10/21/1999................................. 24,927,500
25,000,000 5.26%, 11/4/1999.................................. 24,875,806
------------
Total Federal Home Loan Mortgage Corp. Disc. Note
(cost $49,803,306)............................... 49,803,306
------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION DISC. NOTE - 30.2%
10,000,000 4.70%, 10/12/1999................................. 9,985,639
30,000,000 5.20%, 10/19/1999................................. 29,922,000
23,198,000 5.20%, 10/25/1999................................. 23,117,580
------------
Total Federal National Mortgage Association Disc.
Note
(cost $63,025,219)............................... 63,025,219
------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION MTN - 13.2%
$ 3,000,000 5.12%, 5/26/2000.................................. $ 2,998,498
4,451,000 5.65%, 4/28/2000.................................. 4,448,313
15,000,000 5.80%, 8/17/2000.................................. 14,985,266
5,000,000 6.42%, 10/1/1999.................................. 5,000,000
------------
Total Federal National Mortgage Association MTN
(cost $27,432,077)............................... 27,432,077
------------
REPURCHASE AGREEMENTS - 21.4%
44,643,984 Goldman Sachs & Co.
(5.40%, dated 9/30/1999, due 10/1/1999, maturity
value $44,643,984) (a) (cost $44,643,984) ....... 44,643,984
------------
<CAPTION>
<S> <C> <C>
Total Investments -
(cost $208,898,645)......................... 100.2% 208,898,645
Other Assets and
Liabilities - net........................... (0.2) (378,843)
----- ------------
Net Assets - ................................ 100.0% $208,519,802
===== ============
</TABLE>
(a) Collateralized by $58,491,648 FHLMC, 6.00% to 7.00%, 06/01/06 to
11/01/12; value including accrued interest--$34,571,443. $12,036,510
FNMA, 6.00%, 01/01/29; value including accrued interest--$10,965,421.
Summary of Abbreviations:
FHLMC Federal Home Loan Mortgage Corp.
FNMA Federal National Mortgage Association
MTN Medium Term Note
See Combined Notes to Financial Statements.
13
<PAGE>
EVERGREEN
Reserve Money Market Funds (Formerly Mentor Funds)
Statements of Assets and Liabilities
September 30, 1999
<TABLE>
<CAPTION>
Reserve
Reserve Tax-Exempt Reserve U.S.
Money Money Government
Market Market Money Market
Fund Fund Fund
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets
Investments in securities............. $337,986,890 $65,957,274 $164,254,661
Investments in repurchase
agreements........................... 22,250,865 0 44,643,984
- -------------------------------------------------------------------------------
Investments at amortized cost......... 360,237,755 65,957,274 208,898,645
Interest receivable................... 2,235,335 277,603 561,394
Deferred organization expenses........ 10,158 0 11,275
Prepaid expenses and other assets..... 1,678 28,850 1,999
- -------------------------------------------------------------------------------
Total assets......................... 362,484,926 66,263,727 209,473,313
- -------------------------------------------------------------------------------
Liabilities
Distributions payable................. 1,327,173 139,140 848,312
Due to custodian bank................. 0 70,609 0
Accrued expenses and other
liabilities.......................... 259,559 6,955 105,199
- -------------------------------------------------------------------------------
Total liabilities.................... 1,586,732 216,704 953,511
- -------------------------------------------------------------------------------
Net assets............................. $360,898,194 $66,047,023 $208,519,802
- -------------------------------------------------------------------------------
Net assets represented by
Paid-in capital....................... $360,898,205 $66,045,820 $208,519,802
Undistributed net investment income... 0 0 0
Accumulated net realized gains or
losses on securities................. (11) 1,203 0
- -------------------------------------------------------------------------------
Total net assets....................... $360,898,194 $66,047,023 $208,519,802
- -------------------------------------------------------------------------------
Net assets consists of
Class R............................... $323,392,414 $66,047,023 $ 99,417,378
Class I............................... 37,505,780 0 109,102,424
- -------------------------------------------------------------------------------
$360,898,194 $66,047,023 $208,519,802
- -------------------------------------------------------------------------------
Shares outstanding
Class R............................... 323,392,425 66,045,820 99,417,378
Class I............................... 37,505,780 0 109,102,424
- -------------------------------------------------------------------------------
Net asset value per share
Class R............................... $ 1.00 $ 1.00 $ 1.00
- -------------------------------------------------------------------------------
Class I............................... $ 1.00 -- $ 1.00
- -------------------------------------------------------------------------------
</TABLE>
See Combined Notes to Financial Statements.
14
<PAGE>
EVERGREEN
Reserve Money Market Funds
Statements of Operations
Year Ended September 30, 1999
<TABLE>
<CAPTION>
Reserve Tax- Reserve U.S.
Reserve Money Exempt Money Government
Market Market Money Market
Fund Fund (a) Fund
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment income
Interest.............................. $9,325,347 $996,225 $8,703,803
- -------------------------------------------------------------------------------
Expenses
Advisory fee.......................... 307,339 64,707 301,770
Distribution Plan expenses............ 527,195 100,106 180,368
Administrative services fees.......... 35,759 6,067 33,558
Transfer agent fee.................... 263,594 26,702 108,875
Trustees' fees and expenses........... 3,700 592 3,421
Printing and postage expenses......... 24,721 692 3,363
Custodian fee......................... 29,045 16,883 65,304
Registration and filing fees.......... 37,759 7,459 82,886
Professional fees..................... 19,075 1,281 22,298
Organization expenses................. 6,052 0 4,100
Other................................. 31,650 2,904 3,505
- -------------------------------------------------------------------------------
Total expenses....................... 1,285,889 227,393 809,448
- -------------------------------------------------------------------------------
Net investment income................. 8,039,458 768,832 7,894,355
Net realized gains or losses on
securities........................... (11) 1,203 0
- -------------------------------------------------------------------------------
Net increase in net assets resulting
from operations...................... $8,039,447 $770,035 $7,894,355
===============================================================================
</TABLE>
(a) For the period from October 15, 1998 (commencement of operations) to
September 30, 1999.
See Combined Notes to Financial Statements.
15
<PAGE>
EVERGREEN
Reserve Money Market Funds
Statements of Changes In Net Assets
Year Ended September 30, 1999
<TABLE>
<CAPTION>
Reserve Tax- Reserve U.S.
Reserve Money Exempt Money Government
Market Market Money Market
Fund Fund (a) Fund
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Operations
Net investment income............. $ 8,039,458 $ 768,832 $ 7,894,355
Net realized gains or losses on
securities....................... (11) 1,203 0
- -------------------------------------------------------------------------------
Net increase in net assets
resulting from operations....... 8,039,447 770,035 7,894,355
- -------------------------------------------------------------------------------
Distributions to shareholders
from
Net investment income
Class R.......................... (6,023,478) (768,832) (2,098,702)
Class I.......................... (2,015,980) 0 (5,795,653)
- -------------------------------------------------------------------------------
Total distributions to
shareholders.................... (8,039,458) (768,832) (7,894,355)
- -------------------------------------------------------------------------------
Capital share transactions
Proceeds from shares sold......... 476,129,402 118,440,808 333,090,286
Payment for shares redeemed....... (163,032,119) (53,024,680) (238,249,650)
Net asset value of shares issued
in reinvestment of
distributions.................... 6,830,633 629,692 7,406,128
- -------------------------------------------------------------------------------
Net increase in net assets
resulting from capital share
transactions.................... 319,927,916 66,045,820 102,246,764
- -------------------------------------------------------------------------------
Total increase in net assets..... 319,927,905 66,047,023 102,246,764
Net assets
Beginning of period............... 40,970,289 0 106,273,038
- -------------------------------------------------------------------------------
End of period..................... $ 360,898,194 $ 66,047,023 $ 208,519,802
- -------------------------------------------------------------------------------
Undistributed net investment
income........................... $ 0 $ 0 $ 0
- -------------------------------------------------------------------------------
</TABLE>
(a) For the period from October 15, 1998 (commencement of operations) to Sep-
tember 30, 1999.
See Combined Notes to Financial Statements.
16
<PAGE>
EVERGREEN
Reserve Money Market Funds
Statements of Changes In Net Assets
Year ended September 30, 1998
<TABLE>
<CAPTION>
Reserve U.S.
Reserve Money Government
Market Money Market
Fund (a) Fund
- -------------------------------------------------------------------------------
<S> <C> <C>
Operations
Net investment income........................... $ 1,711,253 $ 4,861,060
- -------------------------------------------------------------------------------
Net increase in net assets resulting from
operations.................................... 1,711,253 4,861,060
- -------------------------------------------------------------------------------
Distributions to shareholders from net
investment income
Class I........................................ (1,711,253) (4,861,060)
- -------------------------------------------------------------------------------
Total distributions to shareholders............ (1,711,253) (4,861,060)
- -------------------------------------------------------------------------------
Capital share transactions
Proceeds from shares sold....................... 69,738,706 170,787,913
Payment for shares redeemed..................... (30,219,258) (130,785,595)
Net asset value of shares issued in reinvestment
of distributions............................... 1,450,841 4,466,073
- -------------------------------------------------------------------------------
Net increase in net assets resulting from
capital share transactions.................... 40,970,289 44,468,391
- -------------------------------------------------------------------------------
Total increase in net assets................... 40,970,289 44,468,391
Net assets
Beginning of period............................. 0 61,804,647
- -------------------------------------------------------------------------------
End of period................................... $40,970,289 $106,273,038
- -------------------------------------------------------------------------------
Undistributed net investment income.............. $ 0 $ 0
- -------------------------------------------------------------------------------
</TABLE>
(a) For the period from November 19, 1997 (commencement of operations) to Sep-
tember 30, 1998
See Combined Notes to Financial Statements.
17
<PAGE>
EVERGREEN
Reserve Money Market Funds
(formerly Mentor Funds)
Combined Notes to Financial Statements
1. ORGANIZATION
Evergreen Reserve Money Market Funds (formerly Mentor Funds) consist of Ever-
green Reserve Money Market Fund ("Reserve Money Market Fund") (formerly Mentor
Money Market Portfolio), Evergreen Reserve Tax-Exempt Money Market Fund ("Re-
serve Tax-Exempt Money Market Fund") (formerly Mentor Tax-Exempt Money Market
Portfolio), and Evergreen Reserve U.S. Government Money Market Fund ("Reserve
U.S. Government Money Market Fund") (formerly Mentor U.S. Government Money Mar-
ket Portfolio), (collectively, the "Funds"). Each Fund is a diversified series
of Mentor Funds, a Massachusetts business trust, an open-end management invest-
ment company organized on January 20, 1992 and registered under the Investment
Company Act of 1940, as amended (the "1940 Act").
The Funds offer Retail ("Class R") and Institutional ("Class I") classes of
shares. Class R shares are sold without a front-end sales charge, but pay an
ongoing distribution fee.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently fol-
lowed by the Funds in the preparation of their financial statements. The poli-
cies are in conformity with generally accepted accounting principles, which re-
quire management to make estimates and assumptions that affect amounts reported
herein. Actual results could differ from these estimates.
A. Valuation of Securities
As permitted under Rule 2a-7 of the 1940 Act, and certain conditions therein,
securities are valued utilizing the amortized cost method. The amortized cost
of an instrument is determined by valuing it at cost originally and thereafter
assuming a constant accretion of any discount or amortization of any premium
from its face value at a constant rate until maturity.
B. Repurchase Agreements
Each Fund may invest in repurchase agreements. Securities pledged as collateral
for repurchase agreements are held in a segregated account by the custodian on
the Fund's behalf. Collateral for certain tri-party repurchase agreements is
held at the counterparty's custodian in a segregated account for the benefit of
the Fund and the counterparty. Each Fund monitors the adequacy of the collat-
eral daily and will require the seller to provide additional collateral in the
event the market value of the securities pledged falls below the carrying value
of the repurchase agreement, including accrued interest. Each Fund will only
enter into repurchase agreements with banks and other financial institutions,
which are deemed by the investment advisor to be creditworthy pursuant to
guidelines established by the Board of Trustees.
C. Security Transactions and Investment Income
Securities transactions are accounted for no later than one business day after
the trade date. Realized gains and losses are computed on the identified cost
basis. Interest income is recorded on the accrual basis and includes accretion
of discounts and amortization of premiums. Foreign income and capital gains re-
alized on some foreign securities may be subject to foreign taxes, which are
accrued as applicable.
D. Federal Taxes
The Funds have qualified and intend to continue to qualify as regulated invest-
ment companies under the Internal Revenue Code of 1986, as amended (the
"Code"). Thus, the Funds will not incur any federal income tax liability since
they are expected to distribute all of their net investment company taxable in-
come, net tax-exempt income and net capital gains, if any, to their sharehold-
ers. The Funds also intend to avoid any excise tax liability by making the re-
quired distributions under the Code. Accordingly, no provision for federal
taxes is required. To the extent that realized capital gains can be offset by
capital loss carryforwards, it is each Fund's policy not to distribute such
gains.
18
<PAGE>
Combined Notes to Financial Statements(continued)
E. Distributions
Distributions from net investment income for the Funds are declared daily and
paid monthly. Distributions from net realized capital gains, if any, are paid
at least annually. Distributions to shareholders are recorded at the close of
business on the ex-dividend date.
Income and capital gains distributions to shareholders are determined in accor-
dance with income tax regulations, which may differ from generally accepted ac-
counting principles. To the extent these differences are permanent in nature,
such amounts are reclassified within the components of net assets.
F. Class Allocations
Income, expenses (other than class specific expenses) and realized and
unrealized gains and losses are prorated among the classes based on the rela-
tive net assets of each class. For the Reserve Money Market Fund and the Re-
serve U.S. Government Money Market Fund, class specific expenses are currently
limited to expenses incurred under the Distribution Plans for the Class R
shares and transfer agent fees for Class R and Class I shares.
G. Organization Expenses
Organization expenses for the Funds, except for the Reserve Tax-Exempt Money
Market Fund, are amortized to operations over a five-year period on a straight-
line basis. In the event any of the initial shares of the Funds are redeemed by
any holder during the five-year amortization period, redemption proceeds will
be reduced by any unamortized organization expenses in the same proportion as
the number of initial shares being redeemed bears to the number of initial
shares outstanding at the time of the redemption. Organization expenses in-
curred by Reserve Tax-Exempt Money Market Fund are reflected in the Fund's op-
erating results for its initial fiscal year.
3. INVESTMENT ADVISORY AGREEMENT AND OTHER AFFILIATED TRANSACTIONS
Mentor Investment Advisors, LLC ("Mentor Advisors"), a wholly-owned subsidiary
of First Union Corporation ("First Union"), serves as the investment advisor
for each Fund.
Mentor Advisors receives for its services an annual advisory fee that is calcu-
lated daily and paid monthly based on the average daily net assets of each Fund
as follows: 0.22% of the first $500 million, 0.20% of the next $500 million,
0.175% of the next $1 billion, 0.16% of the next $1 billion, and 0.15% of any
amounts over $3 billion.
Evergreen Investment Services, Inc. ("EIS"), a subsidiary of First Union,
serves as the administrator to the Funds. As administrator, EIS provides the
Funds with facilities, equipment and personnel. The administration fee is cal-
culated at an annual rate of 0.02% of the Funds' average daily net assets.
Prior to June 14, 1999, Mentor Investment Group LLC ("Mentor"), a wholly-owned
subsidiary of First Union, provided administrative personnel and services for
each Fund at the same annual rate.
For the year ended September 30, 1999, the Funds paid or accrued to EIS and
Mentor, the following amounts for administrative services:
<TABLE>
<CAPTION>
EIS Mentor
-----------------------
<S> <C> <C>
Reserve Money Market Fund....................... $18,233 $17,526
Reserve Tax-Exempt Money Market Fund............ 3,091 2,976
Reserve U.S. Government Money Market Fund....... 12,288 21,270
</TABLE>
Evergreen Service Company ("ESC"), an indirectly, wholly owned subsidiary of
First Union, serves as the transfer and dividend disbursing agent for the
Funds. Prior to September 13, 1999, Boston Financial Data Services, Inc.
("BFDS") served as each Fund's transfer and dividend disbursing agent.
For the year ended September 30, 1999, the Funds paid or accrued to ESC the
following amounts for transfer agent services:
<TABLE>
<CAPTION>
ESC
-----------
<S> <C>
Reserve Money Market Fund................................ $26,527
Reserve Tax-Exempt Money Market Fund..................... 3,765
Reserve U.S. Government Money Market Fund................ 9,805
</TABLE>
19
<PAGE>
Combined Notes to Financial Statements(continued)
For the year ended September 30, 1999 the amounts paid or accrued to ESC and
BFDS by each Fund's Class R shares and Class I shares for transfer agent fees
were as follows:
<TABLE>
<CAPTION>
Class R Class I
-----------------------
<S> <C> <C>
Reserve Money Market Fund...................... $249,176 $14,418
Reserve Tax-Exempt Money Market Fund........... 26,702 0
Reserve U.S. Government Money Market Fund...... 64,236 44,639
</TABLE>
4. DISTRIBUTION PLANS
Mentor Distributors, LLC ("Mentor Distributors") serves as distributor for the
Fund's Class R shares. Mentor Distributors is a wholly owned subsidiary of
BISYS Fund Services, Inc., ("BISYS").
Each Fund has adopted a Distribution Plan, as allowed by the Rule 12b-1 of the
1940 Act, for its Class R shares. To compensate Mentor Distributors for the
services it provided and for the expenses it incurred under the Distribution
Plan during the year ended September 30, 1999, the Class R shares of each Fund
paid a distribution fee, which was accrued and paid monthly at an annual rate
of 0.38% of Reserve Money Market Fund, 0.33% of Reserve Tax-Exempt Money Market
Fund and 0.38% of Reserve U.S. Government Money Market Fund's Class R average
daily net assets.
Each of the Distribution Plans may be terminated at any time by vote of the In-
dependent Trustees or by vote of a majority of the outstanding voting shares of
the respective class.
5. CAPITAL SHARE TRANSACTIONS
The Funds have an unlimited number of shares of beneficial interest with $1.00
par value authorized. Shares of beneficial interest of the Funds are currently
divided into Class R and Class I shares. During the year ended September 30,
1999, transactions in shares of the Funds were as follows:
Reserve Money Market Fund
<TABLE>
<CAPTION>
Period Ended
September 30, 1999 (a)
- ------------------------------------------------------------------------------
<S> <C>
Class R
Shares sold........................................... 426,462,250
Shares redeemed....................................... (107,920,363)
Shares issued in reinvestment of distributions........ 4,850,538
- ------------------------------------------------------------------------------
Net increase.......................................... 323,392,425
- ------------------------------------------------------------------------------
<CAPTION>
Year Ended September 30,
-----------------------------------
1999 1998 (b)
- ------------------------------------------------------------------------------
<S> <C> <C>
Class I
Shares sold............................... 49,667,152 69,738,706
Shares redeemed........................... (55,111,756) (30,219,258)
Shares issued in reinvestment of
distributions............................ 1,980,095 1,450,841
- ------------------------------------------------------------------------------
Net increase (decrease)................... (3,464,509) 40,970,289
- ------------------------------------------------------------------------------
</TABLE>
Reserve Tax-Exempt Money Market Fund
<TABLE>
<CAPTION>
Period Ended
September 30, 1999 (a)
- ----------------------------------------
<S> <C>
Class R
Shares sold...... 118,440,808
Shares redeemed.. (53,024,680)
Shares issued in
reinvestment of
distributions... 629,692
- ----------------------------------------
Net increase..... 66,045,820
- ----------------------------------------
</TABLE>
(a) For the period from October 15, 1998 (commencement of class operations) to
September 30, 1999.
(b) For the period from November 19, 1997 (commencement of class operations) to
September 30, 1998.
20
<PAGE>
Combined Notes to Financial Statements(continued)
Reserve U.S. Government Money Market Fund
<TABLE>
<CAPTION>
Period Ended
September 30, 1999 (a)
- --------------------------------------------------------------------------------
<S> <C>
Class R
Shares sold 162,628,419
Shares redeemed (64,931,129)
Shares issued in reinvestment of distributions 1,720,088
- --------------------------------------------------------------------------------
Net increase 99,417,378
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Year Ended September 30,
--------------------------
1999 1998
- -------------------------------------------------------------------------------
<S> <C> <C>
Class I
Shares sold 170,461,867 170,787,913
Shares redeemed (173,318,521) (130,785,595)
Shares issued in reinvestment of distributions 5,686,040 4,466,073
- -------------------------------------------------------------------------------
Net increase 2,829,386 44,468,391
- -------------------------------------------------------------------------------
</TABLE>
(a) For the period from October 15, 1998 (commencement of class operations) to
September 30, 1999.
6. EXPENSE OFFSET ARRANGEMENTS
The Funds have entered into expense offset arrangements with their custodian on
June 14, 1999, and with ESC on September 13, 1999, whereby credits realized as
a result of uninvested cash balances were used to reduce a portion of each
Fund's related expenses. The assets deposited with ESC and the custodian under
these expense offset arrangements could have been invested in income-producing
assets. The Funds did not received any fee credits during the year ended Sep-
tember 30, 1999.
7. FINANCING AGREEMENTS
On August 6, 1999 the Evergreen Reserve Money Market Funds became party to a
credit agreement between Evergreen Funds and a group of banks (the "Lenders").
Under this agreement, effective for all other Evergreen Funds on July 27, 1999,
the Lenders provide an unsecured revolving credit commitment in the aggregate
amount of $1.050 billion. The credit facility is allocated, under the terms of
the financing agreement, among the Lenders. The credit facility is accessed by
the Funds for temporary or emergency purposes to fund the redemption of their
shares or as general working capital as permitted by each Fund's borrowing re-
strictions. Borrowings under this facility are assessed interest at 0.75% per
annum above the Federal Funds rate (1.50% per annum above the Federal Funds
rate during the period from and including December 1, 1999 through and includ-
ing January 31, 2000). A commitment fee of 0.10% per annum is incurred on the
average daily unused portion of the revolving credit commitment. The commitment
fee is allocated to all Funds. For its assistance in arranging this financing
agreement, First Union Capital Markets Corp. was paid a one-time arrangement
fee of $250,000. State Street Bank and Trust Company serves as paying agent for
the Funds, and as paying agent is entitled to a fee of $20,000 per annum which
is allocated to all of the Funds.
During the year ended September 30, 1999 the Funds had no borrowings under this
agreement.
8. SUBSEQUENT EVENTS (unaudited)
Acquisition of EVEREN by First Union
On April 26, 1999, First Union announced an agreement to acquire EVEREN Capital
Corporation. As part of this acquisition Mentor was combined with the Evergreen
mutual funds complex. On October 1, 1999, the acquisition was completed.
21
<PAGE>
Independent Auditors' Report
The Board of Trustees and Shareholders
Mentor Funds
We have audited the accompanying statements of assets and liabilities, includ-
ing the schedules of investments of the Evergreen Reserve Money Market Fund
(formerly Mentor Money Market Portfolio), Evergreen Reserve Tax-Exempt Money
Market Fund (formerly Mentor Tax-Exempt Money Market Portfolio) and Evergreen
Reserve U.S. Government Money Market Fund (formerly Mentor U.S. Government
Money Market Portfolio), portfolios of Mentor Funds as of September 30, 1999
and the related statements of operations for the year or period then ended, the
statements of changes in net assets for each of the years or periods in the
two-year period then ended and the financial highlights for each of the years
or periods in the three-year period ended September 30, 1999. These financial
statements and financial highlights are the responsibility of the Funds' man-
agement. Our responsibility is to express an opinion on these financial state-
ments and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing stan-
dards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial high-
lights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of Sep-
tember 30, 1999 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by man-
agement, as well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Ever-
green Reserve Money Market Fund, Evergreen Reserve Tax-Exempt Money Market
Fund, and Evergreen Reserve U.S. Government Money Market Fund, portfolios of
Mentor Funds as of September 30, 1999, the results of their operations, changes
in their net assets and the financial highlights for each of the years or peri-
ods described above, in conformity with generally accepted accounting princi-
ples.
KPMG LLP
Boston, Massachusetts
November 5, 1999
22
<PAGE>
Additional Information(unaudited)
YEAR 2000
Like other investment companies, the Funds could be adversely affected if the
computer systems used by the Funds' investment advisor and the Funds' other
service providers are not able to perform their intended functions effectively
after 1999 because of the inability of computer software to distinguish the
year 2000 from the year 1900. The Funds' investment advisor is taking steps to
address this potential year 2000 problem with respect to the computer systems
that it uses and to obtain satisfactory assurances that comparable steps are
being taken by the Funds' other major service providers. At this time, however,
there can be no assurance that these steps will be sufficient to avoid any ad-
verse impact on the Funds from this problem.
FEDERAL TAX STATUS OF DISTRIBUTIONS
For the fiscal year ended September 30, 1999, the percentage representing the
portion of distributions from net investment income exempt from Federal income
taxes, other than alternative minimum tax for the Reserve Tax-Exempt Money Mar-
ket Fund, is 100%.
23
<PAGE>
Evergreen Funds
Money Market
Treasury Money Market Fund
Money Market Fund
Municipal Money Market Fund
Florida Municipal Money Market Fund
New Jersey Municipal Money Market Fund
Pennsylvania Municipal Money Market Fund
Tax Advantaged
Short Intermediate Municipal Fund
High Grade Municipal Bond Fund
Municipal Bond Fund
Municipal Income Fund
Connecticut Municipal Bond Fund
Florida Municipal Bond Fund
Florida High Income Municipal Bond Fund
Georgia Municipal Bond Fund
Maryland Municipal Bond Fund
New Jersey Municipal Bond Fund
North Carolina Municipal Bond Fund
Pennsylvania Municipal Bond Fund
South Carolina Municipal Bond Fund
Virginia Municipal Bond Fund
Income
Capital Preservation and Income Fund
Short Intermediate Bond Fund
Intermediate Term Bond Fund
U.S. Government Fund
Diversified Bond Fund
Strategic Income Fund
High Yield Bond Fund
Quality Income Fund
Short-Duration Income Fund
High Income Fund
Balanced
Balanced Fund
Tax Strategic Foundation Fund
Foundation Fund
Capital Balanced Fund
Capital Income and Growth Fund
Growth & Income
Utility Fund
Income and Growth Fund
Equity Income Fund
Value Fund
Blue Chip Fund
Growth and Income Fund
Small Cap Value Fund
Select Equity Index Fund
Domestic Growth
Tax Strategic Equity Fund
Strategic Growth Fund
Stock Selector Fund
Evergreen Fund
Masters Fund
Omega Fund
Small Company Growth Fund
Aggressive Growth Fund
Growth Fund
Capital Growth Fund
Select Special Equity Fund
Global International
Global Leaders Fund
International Growth Fund
Global Opportunities Fund
Precious Metals Fund
Emerging Markets Growth Fund
Latin America Fund
Perpetual Global Fund
Perpetual International Fund
Express Line
800.346.3858
Investor Services
800.343.2898
www.evergreen-funds.com
28584 551385 11/99
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